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A conversation on migration and development

I was recently interviewed by Kanchan Banerjee, the editor of New Global Indian. The interview touched on many aspects of migration and development that may interest you. Thanks to Kanchan for giving us permission to reproduce the interview below.

KB- About half a decade ago, you were among the first in the world to figure out the first global tally of remittances, what was the result?

DR-The money that migrants send home turned out to be way larger than I expected, the finding actually stunned experts in the field. Gathered from a trickle of hard-earned cash, believe it or not, remittances are larger than $300 billion a year. Compare that with official aid flows which are just about $100 billion a year.

KB-Today you are a leading figure in the area of Migration and Development. What are the factors that attracted you to work on the two related areas of development in today's inter-connected world?

DR- As a migrant myself, I am deeply interested in the phenomenon of migration and remittances. Before Y2K, I was actually talking with friends about starting a money transfer service to India from the US! The main reason for my interest in migration is that it produces instant poverty corrupt practices. This enables a poor person to hold his/her head high in the society. When migrants send money, it helps not only the immediate family members and friends, but also indirectly the local community. I call remittances 'value-added money' because it is not only the dollar that comes in, each dollar also comes with advice on what to do with it. Also remittances are friends in foul weather they increase when the recipient is facing difficult times. There are about 200 million migrants worldwide, supporting as many if not more people at home. That suggests that remittances may reach almost a tenth of the world's population.

A Factsheet on Haiti

We have been receiving a lot of requests for data and facts on Haiti, not only on migration and remittances, but also on the real economy. Here is some data we have downloaded from publicly available sources.

Mobilizing the diaspora for reconstruction of Haiti - via diaspora bonds

With Sanket

In addition to the temporary protected status and facilitation of remittances - see my earlier post, when government offices and banks resume functioning, Haiti could usefully tap its large diaspora's wealth for the reconstruction of community infrastructure and social projects. This could be done via the issuance of "diaspora bonds". By diaspora bond, I mean not only bonding between the diaspora and the homeland, but more specifically a financial instrument for attracting investment from the diaspora.

In the past diaspora bonds have been used by Israel and India to raise over $35 billion of development financing (see my article with Suhas Ketkar). Several countries - for example, Ethiopia, Nepal, the Philippines, Rwanda, and Sri Lanka - are considering (or have issued) diaspora bonds recently to bridge financing gaps. Besides patriotism, diaspora members are usually more interested than foreign investors in investing in the home country. Not only Haitians abroad, but also foreign individuals interested in helping Haiti, even charitable institutions, are likely to be interested in these bonds. Offering a reasonable interest rate - a 5% tax-free dollar interest rate, for example - could attract a large number of Haitian investors who are getting close to zero interest rate on their deposits.

If 200,000 Haitians in the US, Canada and France were to invest $1,000 each in diaspora bonds, that would add up to $200 million. If these bonds were opened to friends of Haiti, including private charitable organizations, much larger sums can be raised. If the bond rating were enhanced to investment grade rating via guarantees from the multilateral and bilateral donors, then such bonds would even attract institutional investors.

Helping Haiti through migration and remittances

A laudable measure that will benefit Haitians, more than any other aid and assistance, is the decision by the United States to grant them temporary protected status (TPS) for 18 months. This will allow about 200,000 Haitians currently residing in the US without proper documents to live and work here legally, without a fear of deportation. It would also allow them to send money home quickly and efficiently through formal remittance channels.

Haiti receives between $1.5-1.8 billion in remittances each year (some estimates are even larger, over a half of its national income).  If the TPS resulted in a 20 percent increase in the average remittance per migrant, we would expect an additional $360 million remittance flows to Haiti in 2010! What is more, if the TPS were to be extended once beyond the currently stipulated 18 months – the extension is almost certain to happen, judging by the history of extensions of the TPS for El Salvador, Honduras, Nicaragua, Somalia and Sudan – additional fund flows to Haiti would exceed a billion dollar over three years. That would be a billion dollar of financial help coupled with goodwill and advice, tailored to the needs of the recipient. Financial help in the form of remittances from family members abroad is always the first to arrive in times of distress. Remittances to Haiti this year will surge, as they have done whenever and wherever there has been a crisis or natural disaster (see paper).

Call for papers: Special Issue on Migration, Remittances and Financial Crisis

Migration Letters invites contributions for a special issue on migration, remittances and, financial crisis (edited by Dilip Ratha, World Bank, USA and Ibrahim Sirkeci, Regent’s College London, UK). The current financial crisis is thought to be among the causes of a decline in migration and remittance flows. However, questions about the future impact of the financial crisis on the size and channels of these flows and the resilience of remittances are still to be answered. As migration and remittances have proven to be a lifeline in many developing countries, analyses of these patterns and prospects are therefore in high demand. In this special issue, we aim to bring together a select set of articles focusing on the relationship between financial crisis and global migration and remittance flows, and on the assessment of policy responses in the sending and the receiving countries.

Security and Development

Wish you a new year of happiness and prosperity.

Recent events have once again confirmed that security threats will remain a recurring theme in this new decade as in the past decade. To me, security and development seems more of a global public good issue than, say, conflict and development, and has more practical implications in the immediate term than, say, climate change and development. Yet I have not read much on the global development implications of the new security regimes. There is a bit of literature on conflict, but not much on the global development implications of the current security concerns.

Tighter security post-911 has made international travel and trade more cumbersome, costly and time consuming than before. Efforts to track the terrorists by tracking the flow of financing has greatly increased the need for new financial laws and documentation to open a bank account, get a car loan, or simply send money. All countries have increased the scrutiny of foreigners’ legal status and intentions. To what extent such tighter measures have impacted different aspects of globalization – for example, aid, trade, investments, tourism, study abroad, sports, the flow of information and the sharing of technology?

International Migrants Day: Remittances Become Even More Important for Development

The International Migrants Day (December 18) comes close to the end of the year – perhaps a good time to pause and look back at how remittances sent by an estimated 214 million international migrants worldwide have become even more important for development during the last year. It is impossible to do justice to the range of issues, international attention and work across the globe on this topic during the course of 2009. We highlight a few that we have been following in our blog, briefs and other work: 

  • The current global economic crisis has made migration and remittances a huge issue now for many developing countries. We have been monitoring the crisis since last November when we made a fairly bold call that remittances might decline modestly but would be resilient compared to other capital flows (see story). Indeed, the data for 2009 show that remittance flows to developing countries have been remarkably resilient, while debt flows collapsed into negative territory and FDI declined by a third.* The recent debt crisis in Dubai has created additional risks, but migrants seem willing to wait it out as prospects at home are often even worse. Nonetheless, the prospect of a sharp reduction in foreign exchange flows after several years of rapid growth—and the possibility that some these workers might return—has brought remittances into the radar-screen of policy makers at the highest levels in virtually every developing country, ranging from Ethiopia to India to the Pacific Islands.
     

New Jobs Program: More or less opportunities for immigrants in USA?

On December 08, 2009, President Obama outlined a proposal to encourage small business to hire workers in 2010 by opening lines of credit and offering tax breaks.  The impact of this proposed measure will be different for foreign-born low-tech entrepreneurs and foreign-born high-tech entrepreneurs. Prior to the crisis, self-employment was spreading among foreign workers in USA and in Europe. According to the U.S. Small Business Administration (2007) “the self-employment rate for foreign-born residents of the Unites States has grown faster that of native born residents over the past ten years”. Lack of access to employment opportunities commensurate with immigrants’ human capital may encourage them to look for self employment, business alternatives.

High-skill and low-skill immigrant entrepreneurs tend to concentrate in certain niches. For example, Salvadorian, Colombian and Dominican firms are concentrated in retail sales and business services (Robinson, 2005). Immigrant-owned firms are mainly retail, wholesale, personal and professional service enterprises and are typically operated by family members. The management structure is comprised of the immigrant owner and his/her close family members and relatives (Page and Plaza, 2006). Foreign-born founders of “high-impact” companies in high tech sectors are concentrated in business services and engineering services and located in the states with large foreign-born residents such as California and Texas. (Hart, Zoltan and Spencer, 2009).

Managing Emigration: A Growing Priority for Migrant-Sending Governments

When I recently traveled to Addis Ababa, Ethiopia, I spoke with several government officials in the Ministry of Labour and Social Affairs who told me about the many problems encountered by their migrant workers in the Middle East.  As more Ethiopians, especially women, have been migrating to the Middle East as domestic workers, the embassies and consulates have received many complaints about false contracts being issued, passports of their nationals being taken away by their employers, and abuses in the work place.  In order to tackle these problems, the government created the Overseas Employment Service, which is modeled after the Philippines Overseas Employment Administration.

Similar to the Philippines, the office regulates the private recruitment agencies to ensure that the migrants are not signing false contracts.  All private recruitment agencies are required to obtain a 300 Birr (USD$30) license from the Ministry to recruit workers for one year (renewable), report the status of their workers, and are subject to auditing by the office to ensure that the workers are not being cheated by the agencies or their employers abroad.  The office also provides pre-departure orientation seminars to educate Ethiopians about the rules of their employment contracts, how to send remittances, and the culture and work conditions in the destination country.  This three hour orientation is conducted in the Ministry offices in Addis Ababa and the government has started 3 years ago to make it mandatory for those departing the country on overseas contracts. 

Dubious Dubai

I was in Dubai two weeks ago to attend a meeting of the World Economic Forum. Our hosts, the Government of Dubai, told us that Dubai had turned the corner – hotel occupancy was up, airline traffic had recovered, and Burj Dubai, the tallest building in the world was complete. And then the story broke – Dubai World was having difficulty repaying creditors. 

  Photo ©istockphoto.com

I have been to Dubai twice this year. In early 2009, I learnt that migrants were not returning en masse as reported in the media at the time. They have stayed on instead, even at the cost of losing legal status in many cases.  This time conversations with some Bangladeshi construction workers at a labor camp brought out some interesting facts: Because new construction is slowing, maintenance is doing well. Migrant workers in maintenance and hospitality are doing better than those in new construction and finance. Many migrants are moving on to Abu Dhabi and other oil-rich Emirates and neighboring countries where huge infrastructure investments are going on. Many are coping with the crisis by cutting consumption and sharing accommodation. Many have sent their families back home, so the funds spent in Dubai are now remitted home.

Many migrant workers, from Bangladesh in particular, are somewhat stuck in Dubai because they cannot afford to return. It costs about 12,000 dirhams to pay recruitment agencies and travel costs. At a monthly income below 900 dirhams – no overtime these days – a construction worker can easily take three years to save enough to repay recruitment costs. Too bad there is a crisis – they just can’t risk returning home. So many are entering into creative arrangements (e.g., taking unpaid leave) with employers to simply wait it out in Dubai.